GBP Exchange Rate Outlook 25th March

By Andrew Bromley

25th March, 2014

Unemployment Back in Focus

It has been announced this morning that Royal Mail are currently consulting with the trade union Unite over 1,600 job losses, most of which are to be in the head office as part of a cost cutting plan. The company believe that the jobcuts will save about £25m. However, while this may help the Royal Mail it is likely to have a damaging impact on the UK unemployment levels which is currently a key focus for the economy and also for Sterling exchange rates. Previously Mark Carney, Governor of the Bank of England (BoE) stated that should unemployment fall below 7% then the BoE will consider raising interest rates. Ever since Mr Carney gave this forward guidance unemployment has fallen faster than the BoE were expecting and so they have back tracked slightly however the markets are still attributing any fall in unemployment as extremley positive for GBP exchange rates while the opposite is also true. So, with this morning’s announcement it is clear that it is ilkely to be bad news for the Pound.

UK Economic Data – GBP Exchange Rates

Today there is a raft of economic data for the UK which means we could be in for a busy day for Sterling exchange rates. We have mortgage approvals, inflation figures in the form of Consumer Price Index, house price index, producer price index and also retail price index. So, it is clearly a very busy morning and with so much economic data due it will help paint a very clear picture of the UK economy and so could spark a lot of Sterling exchange rate movement. The expectation for the data is for inflation to fall, mortgage approvals to remain steady and production figures also drop, so if this is the case we may see some Sterling weakness, especially if inflation does show as falling from the current 0.9% to the predicted 0.7% as that has been one of the major positives for the economy as the BoE had managed to keep inflation running steady at their target level of 2% for so long and so if it starts to fall then it will effect the chances of an interest rate hike and also could be damaging for both Mark Carney and Chancellor George Osborne’s plans for the UK moving forward.

So, with so much due to happen this morning it will be worth keeping a very close eye on the currency exchange rates, if any of the data sets come out different to expectation then we may see a lot of volatility on the markets.

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